National Housing & Rehabilitation Association

Summer InstituteJuly 18-21, 2018 Martha’s Vineyard, MA

Sponsors:

NH&RA Summer Institute

Development & Finance Team: Development:Developer/Sponsor- Nuestra Communidad CDC & Windale DevelopersArchitect- Davis Square Architects Affordable Housing Consultant- Henry Joseph & AssociatesNMTC Consultant- Affirmative Investments, Inc. General Contractor- Bilt-Rite Construction, Inc.Accountant- Cohn Reznick

Finance: NMTC & LIHTC Equity Investor- Bank of America Merrill LynchLIHTC Syndicator- National Equity Fund, Inc. Construction Lender- Bank of America Merrill LynchLeverage & Perm Lender- Eastern BankNMTC CDE Allocation- Bank of America CDE & LISC (NMSC) Lender- MHIC Healthy Neighborhoods Equity Funds (HNEF)

Public Sector:Massachusetts DHCDAffordable Housing Trust FundCity of BostonFHLB AHP

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NMTC Case Study: Bartlett Station Bldg. B, Roxbury, MA

Project Summary:

• Phase one of 8.6 acre mixed-use, mixed income brownfield redevelopment of former MBTA Bartlett Yard bus depot in the Dudley Square neighborhood.

• Bldg. B is a new five-story 107M SF mixed-use residential building on a 1.72 acre parcel. Total development budget $32.3MM

• The project will consist of 12M SF ground floor retail space, 60 residential units, 15.5M SF public plaza and 17.9M SF two-story parking structure containing 46 spaces.

• 32 units are affordable LIHTC, 22 units are market rate, 6 units affordable. Good Food Markets, a fresh food market is leasing a portion of the ground floor retail space.

• Shared building amenities include community room, community kitchen, management office, fitness center, common laundry room, residential and bike storage.

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Bartlett Station Bldg. B Unit Mix

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Project Finance Summary:

• $16.5MM of NMTC allocation; $8MM BAML and $8.5MM LISC. BAML is the NMTC investor for both allocations contributing $6.2MM in equity.

• Eastern Bank provided $7.2MM mini-perm for the Leverage Loan. Nuestra provided sponsor leverage loan of $3.866MM compromised of $990M AHTF loan, $2,040MM HNEF loan and $836M Nuestra/Windale.

• Nuestra provided a direct sponsor loan of $185M, HNEF $860M direct loans to QALICB.

• $9.5MM BAML 9% Federal and State LIHTC equity invested through NEF Fund.

• $9.6MM BAML construction loan for the LIHTC residential units.

• Public sector support: $1.4MM Mass DHCD housing stabilization funds, $750M DHCD investment trust funds, $1MM City of Boston neighborhood Housing Trust funds, $1MM Boston Inclusionary Development funds, and $500M FHLB AHP Grant. Eastern Bank $1.75MM Perm loan.

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• Healthy Neighborhoods Equity Fund (HNEF) provides patient capital for transformative mixed-use, mixed-income real estate projects that foster walkable neighborhoods and healthier living in transitional or unproven markets.

• HNEF designed as an equity investment capturing upside, typically from sale or refinancing after 10 years; 8% target return for Fund I

• Structuring challenge to combined HNEF with NMTC: 1. HNEF return depends on selling residential units as condos after year 72. NMTC true debt test depends on holding as rental and repaying debt over 30 years3. NMTC 20% commercial revenue test on day 1 versus HNEF interest in community-serving

retail uses that take longer to arrange4. Debt forgiveness income to HNEF if an owner

Solution: HNEF split between high-interest cash-flow note direct to QALICB and junior leverage loan behind Eastern with accruing interest to soak up up-side AND master lease of commercial space by CDC sponsor backed by large reserves from multiple sources

MHIC - CLF

Legal & NMTC Challenges:

• Condominium ownership with separate LIHTC and NMTC condos

• Initial temporary structures to form Condo

• “80/20 Requirement” – 20% commercial revenue on the NMTC condo parcel. Master lease of the commercial space by Nuestra CDC

• Commercial space lease reserve for tenant improvement build out and balancing the NQFP test

• Declaration of Reciprocal Easements- shared areas and expenses

• Construction contract and allocating the development costs between the two condo ownership parcels- LIHTC cost certification

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Bartlett Station Building B- Floor Plans Condo Structure

Community Benefits:

• 38 Affordable Housing Units @ 30%, 60% and 80% AMI.

• Good Food Market providing local, natural and healthy food access to the low-income residents of Roxbury.

• Job creation estimated at 50 FTE from tenants of the commercial space.

• Transit-oriented development: Bartlett Station will be a dense, walkable urban neighborhood located 2 blocks from Dudley Station, a busy bus station in Boston. Densely developed master plan to ensure the projects nearby transit amenities are utilized.

• Energy sustainability using green technology. Bldg. B itself will be a minimum LEED silver.

• Public Plaza will feature installations by visual artists, ranging from street sculptures to murals; rotating visual art displays and diverse performance programming.

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NMTC Investment Exit Strategies

NMTC Exit:

Option 1:• After year 7 (EOC)- conversion of 28 units to condos. For sale units and

associated parking spaces• Upon condo sellout year 10- refinance commercial space • Use proceeds to payoff remaining debt/leverage loans (Eastern Bank, HNEF)

Option 2:• Residential units remain rental housing• Refinance of both NMTC Leverage debt and LIHTC Perm loan (Eastern Bank)

Option 3:• Refinance of NMTC Leverage debt only• Lender to accept NMTC condo as collateral?

* LIHTC- 15 yr. compliance and affordable units in perpetuity

NH&RA Summer Institute